Poll Numbers Show Albertans Want an Increase in Royalties
Author: admin | Date: October 3, 2007 | Please Comment!A recent poll published in today’s Calgary Herald reveals that 88% feel that Albertans are not getting our fair share of the royalties. To add to that, 67% of respondents want the government to inact the full measure of the Royalty Review recommendations.
Here are some of my comments on the royalty issue:
Thank you for your letter regarding the recent Royalty Review in Alberta. As MLA for Calgary MountainView and Shadow Minister of Environment, it is my privilege to respond to your concerns.
As a politician, I am not a geologist or an economist per se, my job is to survey the wealth of information, listen to the people, and make decisions that are in the long-term best interests of the province as a whole. To that end, what may be good for the province as a whole may not be overly beneficial for one segment of the population but I always try to be as balanced as possible.
It is my belief that the growth we’ve experienced in the province over the past number of years has been too much too fast. I hear from so many people that the boom has not benefited them at all with higher living costs and wages that have not kept pace with inflation. Although some may disagree, I believe in a strong role for government to safeguard vulnerable segments of the population from negative effects of unsustainable economic activity. With the gap between the rich and the poor widening more and more in the province, one cannot assume that benefits will simply trickle down. I would like to see managed growth in Alberta where we are able to keep up with environmental, social and infrastructure needs.
All of this to say that we must ensure Albertans have something of long-term value to show for the development of this one-time non-renewable resource.
The first line of the Alberta Royalty Review Panel’s Executive Summary reads: ‘Albertans do not receive their fair share from energy development.’  I believe this is true. This situation has resulted from the Progressive Conservative government’s inability to plan and to manage the non-renewable resource sector and frankly, to stand up for all Albertans. We need to take a close look at the current economic situation in Alberta, and make some tough decisions about the direction we would like to see our growth take us.
With the recent release of Auditor General Fred Dunn’s report, the secrecy and mismanagement of Alberta’s energy royalties is even more evident. The Auditor General’s report shows a government that is deliberately misleading Albertans. Under existing arrangements he found that at least $1 billion in additional royalties could have been collected annually since 2000.
Alberta’s non-renewable resources belong to all Albertans including those of generations to come. Companies are contracted to develop this resource on behalf of Albertans in a business arrangement in a free market. Albertans deserve their full share. Once these resources have been extracted, they are gone forever and we have a duty to think of the future, when our non-renewable resource base may be less robust.
Changes must be made in Alberta’s royalty structure. The government needs to get this right, which means we must approach these changes in a measured and informed manner, where people and industry know what to expect. We must develop and stick to a clear plan that will lead them to a sustainable and prosperous future.
Thank you again for your interest in this issue. Correspondence such as yours helps us to be more effective as Alberta’s Official Opposition. For my part, as MLA for Calgary MountainView, I will continue to fight for a fair share for all Albertans. If you are interested in learning more about our policies, please visit http://www.albertaliberalcaucus.com/, or contact our office.
Sincerely,
Dr. David Swann, MLA Calgary Mountain View
7:23 pm on October 23rd, 2007
Dear David,
I am a geoscientist working for a mid-size international oil company. I live in “The Bridges” complex of NE Calgary. Before joining the oil and gas industry I worked for 7 years in the environmental industry, mapping contaminated soil and groundwater in Alberta, and other parts of North America.
The majority of this work was around oil field facilities but it also included urban industrial facilities, and intensive livestock operations.
In my opinion, all Albertan’s are responsible for the erosion of the quality of our environment. Every Albertan has a role to play in protecting our natural environment and resources.
Here are my comments to the Alberta Government’s web-site concerning the current discusion on royalties.
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In my opinion the issue that is most important here is not the dollar value or the percentages of the royalties, but how can we maximize the benefit that Canadians derive from Alberta’s oil and gas resources? Oil and gas is a non-renewable resource and it is in a state of rapid decline in western Canada. We don’t have that long to get it right!
The resource is valuable but it also costs a lot of money to extract. The Alberta Government derives income from the activities of the oil and gas industry in a number of ways (e.g. royalties, land sales, corporate income tax, and personal income tax). I think the government and the oil industry needs to consider the following items in addition to a review of the royalties :
1) Improve efficiency of exploration for new oil and gas resources. The current system of land sales and land activity has resulted in a fragmentation of the exploration lands ultimately reducing the effectiveness of any exploration effort and the squandering of money to drill for poorly studied exploration targets. Short term gains to the government from rapid turn-over of land and unrealistically high land prices have created a monster that the government cannot control. I think a system similar to offshore or international exploration regions needs to be considered where blocks are large, exploration commitments are significant and realistic, the bid process is open, and land sales are more carefully planned.
2) Drill fewer wells. Drilling 15,000 – 20,000 wells a year for such small returns is a gross waste of money. The government should encourage more effort to be put into planning wells to succeed rather than relying on a lot of wells to be drilled to keep the economy buoyant. The Western Canadian Basin is over-drilled but under-studied.
3) Commitment from government to provide technical incentives for new exploration. The Alberta Government needs to get serious about research and development and have technical input on geoscience and engineering problems faced by the oil and gas sector. I look to counties like Norway and Australia were they have large technical institutes designed to provide the government with the knowledge to review commercial activity and also to provide the country with a competitive edge in attracting exploration spending and developing oil and gas resources. Currently the EUB and Alberta Energy are grossly under-funded and are not able to provide the oil and gas industry with any technical support. Research and development is left to the universities and they are similarly ill-equiped to do this effectively. Invest some of the income generated from oil and gas on positioning Alberta for a long future in oil and gas technology (domestic and international).
4) In-order to understand the oil and gas business you need to be in the oil and gas business. Canada\Alberta should set up a National\Provincial Oil Company that participates fairly in all of the activities of the oil and gas industry. Models such as AEC and PetroCanada did not work. Government agencies such as the federal NEB and GSC, or the provincial EUB and AGS cannot provide information to the government on the time scales needed to make fast business decisions. Let’s look at some other examples around the world of state owned enterprises that work in the oil and gas sector (eg Statoil) and come up with a creative solution.
In conclusion, we should be paying more for the resource, but the flip side is the government should be doing more to make sure we have a legacy from the resource that continues long after the oil has gone. This legacy should not just be millions of abandoned wells to clean up.
Sincerely
Dr Richard Kellett P.Geoph.
Senior Geophysicist, Exploration